Marcus Reaches Out to South Africa Central Bank Critics
Gill Marcus chose a speech to a labor union that wants to nationalize the South African central bank she heads to defend its independence and inflation- targeting policy.
Marcus, 62, had to pause several times as hundreds of delegates from the National Union of Metalworkers of South Africa talked and ate while she spoke. That didn’t detract from her message at the June 7 presentation in the dining hall of Durban’s main conference center. The Reserve Bank will act without “fear or favor” on interest rates, she said.
While her comments didn’t persuade the unions, it’s her willingness to meet with detractors that’s come to characterize Marcus’s term since November 2009. Her predecessor, Tito Mboweni, had a decade marked by conflict with labor unions, surprise rate decisions and dominance in communicating policy.
“She has managed to open her hands to those who criticize her,” S’Dumo Dlamini, president of the Congress of South African Trade Unions, whose 2 million members include the metalworkers, said in a phone interview from Johannesburg. “She is always open to engagement.”
When the metalworkers union picketed outside the central bank’s head office in Pretoria in May 2009, Mboweni declined to meet them, drawing criticism from union leaders who called him “arrogant.” Marcus was named governor two months later after President Jacob Zuma won power with the backing of labor unions.
Marcus, who wears flowing kaftans and is unmarried, is the first female governor of the 91-year-old central bank. She wasn’t available to be interviewed because of work commitments, said her spokesman, Hlengani Mathebula.
“We aren’t this black box in Pretoria,” Marcus said in a July 4 speech in Johannesburg. “We think it is very important that people better understand the economy and monetary policy decisions. Our society should support our central bank.”
In a country where unemployment is at 25.2 percent, Marcus argues that the central bank’s role is to keep inflation under control to encourage investment and jobs.
Investors are drawn to her message, pushing the yield on South African’s 10-year bond to a record low of 6.79 percent yesterday as inflation slows. Consumer prices rose 5.5 percent in June from a year ago, the statistics office said today.
At the same time, unions say that the Reserve Bank’s focus on price stability is undermining job creation and is inappropriate in a country where about a third of the population lives on less than $2 a day.
Besides trying to placate the unions, Marcus has set up regular meetings with political parties, economists, business groups and the media. To improve transparency, she has given her deputies and Monetary Policy Committee members a bigger role in communicating policy.
“She felt it was very important to speak not just to the financial markets but to all stakeholders,” Brian Kahn, Marcus’s economic adviser and an MPC member, said in an interview from Pretoria. The goal is to “get people to understand not just what the bank does but what it can’t do. Central banks are being expected to do everything because governments are failing and economies are remaining weak.”
Marcus’s approach may be helping to create a more stable policy environment. Of the 16 rate decision meetings she has chaired, only one outcome surprised the majority of economists surveyed by Bloomberg. That compares with five in the previous 16 meetings chaired by Mboweni.
The MPC has kept the benchmark interest rate unchanged at 5.5 percent for a record 20 months and will leave the rate on hold tomorrow, according to 16 of the 18 economists surveyed by Bloomberg.
“Investors, by and large, come away impressed both by her and by the way she interacts with her subordinates in such meetings,” Peter Attard Montalto, an economist at Nomura Plc in London, said in an e-mail. Marcus often defers questions to her colleagues in a way Mboweni rarely did, Montalto said.
Marcus, who was born in Johannesburg, went into exile in London in 1969 with her parents, who were white anti-apartheid activists. During that time, she completed her bachelor of commerce degree through correspondence at the University of South Africa.
She began honing her skills at public relations as she campaigned for the then-banned African National Congress. While working at her parent’s sandwich shop in Knightsbridge, she published documents for the ANC and ran a news-clipping service. In 1982, apartheid security agents detonated a bomb next to her offices, which were vacant at the time.
She returned to South Africa after a ban on the ANC was lifted in 1990 and helped set up the party’s communications unit there.
“Gill played a very, very significant role,” Pallo Jordan, an ex-cabinet minister and former head of the ANC’s Department of Information and Publicity, said in a phone interview from Cape Town. “She was at the center of the operation in London. The ethos of consultation and drawing in as many players before you make up your mind about important decisions, she brought with her from the ANC days.”
Marcus became a lawmaker after the ANC won the first all- race election in 1994, serving as head of parliament’s finance committee and eventually becoming deputy finance minister and deputy central bank governor.
After five years of working under Mboweni, she quit to become an academic. In 2005, she was named chairwoman of gold miner Western Areas Ltd. and moved two years later into the same position at Absa Group Ltd. (ASA), South Africa’s biggest consumer bank. It’s now controlled by London-based Barclays Plc.
“My recollection of her is someone who is incredibly thorough, very diligent,” said Andre Roux, head of fixed-income investments at Cape Town-based Investec Asset Management, who worked with Marcus at the National Treasury while he was a deputy director-general. “She demanded quality work. You had to deliver.”
Marcus hasn’t satisfied all her constituents: She is being challenged by labor unions to make the central bank more relevant to the economy’s needs. The ANC agreed at a policy conference last month to take more “radical” steps to boost economic growth, without proposing specific measures.
“She is willing to engage, but the point is that engagement, how much does it translate into developmental actions of the bank,” Cosatu’s Dlamini said. “The Reserve Bank operates in a very conservative space. We continue to be unhappy that the Reserve Bank doesn’t seem to adjust and change its approach on issues.”
Marcus counters that there’s only so much central banks can do to fight an unemployment rate that has more to do with a lack of skilled workers and an economy that isn’t growing fast enough to absorb new jobseekers. Her position has also been made easier by the fact that her predecessor had already squeezed a lot of inflation out of the economy by the time she took over.
“We did the best we could,” Mboweni said in an e-mail. “I still hold the view that central bankers continue to distinguish themselves by avoiding populism. They refuse to be pressured by politicians, the media, intellectuals and markets.”
Mboweni pushed inflation down to 5.9 percent from a peak of 13.7 percent in August 2008, an achievement that has helped Marcus keep the policy rate at the lowest level in more than 30 years.
Marcus also has more flexibility in meeting her inflation goal. In 2010, Finance Minister Pravin Gordhan adjusted the wording of the bank’s mandate to make it more explicit for policy makers to take into account economic growth and employment when setting interest rates.
While Marcus has increased transparency of policy making, the central bank still has room to improve communication, such as publishing minutes of its MPC meetings, said Montalto. At least nine of the central banks from the Group of 20 nations, including in the U.S., Brazil, Turkey, India, Mexico and South Korea, release details of policy makers’ discussions.
The real test of the governor’s ability to placate investors and critics may come when inflationary pressures intensify and she’s forced to raise interest rates.
“She has been firm, she has been applying the correct policies,” Chris Stals, who was central bank governor from 1989 until 1999, said in a phone interview from Pretoria. “There will be more criticism against her when interest rates have to go up. I always used to say you can’t ask the people what interest rates should be, because you don’t ask turkeys to vote for Christmas.”
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